MacroAdvisers 2Q GDP @ 2.6%, down from 2.8%, Jobless Claims

And MacroAdvisors downgrades their US 2Q11 GDP growth with a worse mix: more inventories, less consumption, from 2.8% to 2.6%.

And now with those Jobless Claims. As I guessed (no tool to forecast here... just a guesstimate, like Mr. Gartman usually says) that if this week's claims came in @ 420k and that horrible +470k+ number dropped out of the 4wk moving average we'd still see a very bad trend.


And here we are. INJC @ +422k, last week's number revised up +4k.
Below the NSA (those seasonal adjustments are tought, huh!) 4 and 6k average compared to LAST year.
Is it Japan? Is it the accumulation in inventories making rounds and 'firing people'?
I do not know nor do I forecast, but I still think that this pause in the upward movement of risky-markets is bad for the economy. That it will cause numbers to come in worse than before, therefore bringing markets down and feeding into the loop (markets down, economy down, markets down...) until more stimulus comes.

For now I will leave this post with the excerpt below, from the Factory Orders report released earlier this morning:

Inventories

Inventories of manufactured durable goods in April, up sixteen consecutive months, increased $3.3 billion or 0.9 percent to $350.6 billion, unchanged from the previously published increase. This was at the highest level since the series was first published on a NAICS basis and followed a 1.7 percent March increase.

*Disclaimer: charts and data are presented as I receive/see them. Sources are usually not checked for validation and my own calculations are of 'back of the envelope'-type. I am aware that some math that I do myself might be wrong and/or misleading to some extent. In financial markets the rate of change of economic data is often more important than the actual level and the perception of 'what is priced in' is more important than 'what is actually going to happen'. This is actually the way people pick entry and exit points. So... yes, sometimes you might say 'This guy is an idiot, this is way wrong!' with a high conviction, being right. Not to worry. Markets are made of expectations and the clash of conviction between its participants. Portfolio managers know that being an idiot is sometimes profitable and being smart is often a bad choice. It is all reality, sometimes good, sometimes bad. By the way: corrections to my analysis and intelligent debate is welcome. theintriguedtrader AT gmail do com

About those Initial Jobless Claims

It might not be anything, but I'll write about this anyway. It makes some sense in my head.

A lot of PhD Economists have these models to capture seasonality in data, etc, but, considering that a lot of these models will get fundamental moves incorporated to their models as seasonality, I like to look at raw data, non-seasonally-adjusted, and compare it YoY or to the trend change compared to the year before (ie: how are we in Jan-May x 2010), etc.

Find below 3 charts of Initial Jobless Claims...

First 2 = 4wk average of IJC NSA, 52-week change (YoY). One of them since 1980, the other one since 1995.
In recessions the YoY change (52x52 period change in weekly data) increases and when the recovery sets in the chart goes down (reduction in claims x year ago).

The pattern was the same after the 82 recession (Volcker kicking some ass), 94s Tequila Crisis, 97s brief Asian Crisis, Dot-com bust 2000-2001, 2003s tiny double-dip and 2007-2009 Great Recession.
Deterioration has peaked from the dramatic mid-2009 levels, but now the YoY change seems to be close to positive levels again, meaning that there's higher risk that we will see deterioration in unemployment claims.

If you check out the 3rd chart you will notice that we're still with more claims than ALL years since 1998 with exception of 2009-2010 when the recovery was picking up.
Now also notice that the distance between 2011s path in 4wk-avg claims and 2010 has decreased from the bottom of the chart. As the YoY charts indicate, it means the recovery in jobs is actually slowing instead of accelerating as lots of people say.

Some might say that the deceleration is natural as the neutral level is somewhere around where we are, so changes in jobless claims will be less volatile to both sides... Some might say this is temporary, that it was weather impacting or that the japanese supply-chain reverbations are also temporary...

But I will step into the path of humbleness to say that I have no confidence that we are really going to see a pick up in growth, especially considering all the fiscal and monetary stimulus in place that should, as time goes by, have smaller impact on the economy.

The american economic backdrop (deleveraging) is certainly not supportive of such view if you consider the wearing-off stimulus.

*Disclaimer: charts and data are presented as I receive/see them. Sources are usually not checked for validation and my own calculations are of 'back of the envelope'-type. I am aware that some math that I do myself might be wrong and/or misleading to some extent. In financial markets the rate of change of economic data is often more important than the actual level and the perception of 'what is priced in' is more important than 'what is actually going to happen'. This is actually the way people pick entry and exit points. So... yes, sometimes you might say 'This guy is an idiot, this is way wrong!' with a high conviction, being right. Not to worry. Markets are made of expectations and the clash of conviction between its participants. Portfolio managers know that being an idiot is sometimes profitable and being smart is often a bad choice. It is all reality, sometimes good, sometimes bad. By the way: corrections to my analysis and intelligent debate is welcome. theintriguedtrader AT gmail do com

More Jobs needed for those Claims

This post was also missing in the draft box after Blogger's technical issue last week.
------------------------

Ladies, good morning. Slept alright?

So... this morning we got what I mentioned is a much more reliable job-growth indicator.

The Initial Jobless Claims came at +434k, slightly above market expectations of 430k and last week's surge was revised upwards 4k to +478k.

Beauty pieces below:

My reading of these charts, and perhaps I have this reading because economists mention it, is that average IJC above 400k/week is not positive for job growth.

I charted them together and it seems to, at least, make sense.

If the +400k is the threshold I am really not sure. But, woman, listen to me, these charts, from 1990, tell me that the current level of +437k for the 4-week average is INCOMPATIBLE with 244k NFP monthly growth (April's number) and not even compatible with POSITIVE job growth.

But that's me speaking. I am no economist. I am not adjusting numbers since 1990 for population growth, etc.

I'm just thinking through writing. Organizing my ideas.

EM Equity markets started the way down... through high inflation and an on-going hiking cycle. The Brazilian Ibovespa is claiming 10-month lows. If you discount if by the local CDI risk-free you get a negative 8-10% return for the period. On the way up it was Sep09 when the index hit 63k points.

Commodities then came at us in recent weeks. Comex Copper made highs around 460 earlier in the year... now back to 390, 15% drop. Back to Nov10 levels.

Crude is still way above last-year levels, but dropped a good 15% from the highs.

And that is with rent prices going up in the US. Housing prices marking a double-dip (CoreLogic: House Prices declined 1.5% in March, Prices now 4.6% below 2009 Lows), a surge in Initial Jobless Claims (4wk avg @ Nov10 levels), US average AAA Gas Prices almost 30% from Dec 2010 levels.

I know that corporate earnings came strong for 1Q11 providing room for the S&P 500 equity index to be at current levels, but people say (read Jeremy Grantham from GMOs post from yesterday) margins are peaking or already peaked and, as Vitaly Katselnelson says, we're not in period of hitting offers in terms of P/E multiples. We're in a period of contracting multiples or at least side-ways multiples.

There is a lot of uncertainty in the global economic outlook. You all know those already so I won't repeat them. Be prudent, don't chase stretched rallies, be selective on what you buy, think independently, study very hard. And worry about the return OF your capital and not only about the return ON your capital. Always worry.

Best regards,

The Intrigued Trader

*Disclaimer: charts and data are presented as I receive/see them. Sources are usually not checked for validation and my own calculations are of 'back of the envelope'-type. I am aware that some math that I do myself might be wrong and/or misleading to some extent. In financial markets the rate of change of economic data is often more important than the actual level and the perception of 'what is priced in' is more important than 'what is actually going to happen'. This is actually the way people pick entry and exit points. So... yes, sometimes you might say 'This guy is an idiot, this is way wrong!' with a high conviction, being right. Not to worry. Markets are made of expectations and the clash of conviction between its participants. Portfolio managers know that being an idiot is sometimes profitable and being smart is often a bad choice. It is all reality, sometimes good, sometimes bad. By the way: corrections to my analysis and intelligent debate is welcome. theintriguedtrader AT gmail do com